Riverside County pension costs rise $22 million

Riverside County's pension costs are projected to rise $22 million next fiscal year to $203 million, but the increase would have been even higher had the Board of Supervisors not adopted a package of reforms in 2011, according to a new report.

Reforms are expected to generate savings of $75 million in fiscal year 2013-14, which begins July 1, preventing costs from otherwise soaring to $278 million, the annual Pension Advisory Review Committee report shows.

"That shows you the importance of the reform we did," Supervisor Marion Ashley said in a telephone interview Friday. “It could have been a lot worse.”

Human Resources Director Barbara Olivier, who serves on the panel, said the county can shave costs by $3 million, to about $200 million, if it elects to prepay a large chunk of its pension obligations.

Supervisors will be asked to authorize prepayment when they receive the 51-page report Tuesday.

The report was prepared by Bartel Associates of San Mateo, the county's consultant on pension matters. Retirement benefits are managed for county employees by the California Public Employees' Retirement System, or CalPERS, which is the nation's largest public pension program.

The debt, or unfunded liability, is projected to be $1.01 billion as of June 30, the report states. That compares to assets of $6.1 billion.

The pension debt had been building. Listed as $995 million in 2010, the debt reached $1.06 billion in 2011 and $1.14 billion last year, officials said earlier.

Although the roughly $1 billion debt is concerning, the report emphasized 85 percent of the retirement program is funded. The report says the industry benchmark for a financially sound program is 80 percent.

The deficit includes $347 million owed on bonds sold in 2005 to ease financial pressure on the retirement system, according to the report.

"... The county is basically breaking even ---- the county has a $5 million net savings ---- as a result of the sale of the bonds," the report states.

As for the annual pension cost, it rose in part because CalPERS isn't generating the returns on investments that it expected, and is raising rates on participating government agencies.

"It’s too bad it went up," Ashley said. "But we knew it was going to go up because CalPERS lost all that money during the 2008 crash. They’re going to make us bite their bullet.”

One of the more alarming trends is the portion of county payroll dedicated to retirement.

The county divides its retirement plan between two sets of employees: miscellaneous and safety. Safety covers law enforcement officers and other public safety employees; miscellaneous takes in everybody else.

As a percentage of payroll, the cost for the large miscellaneous group is expected to rise from 13.5 percent this year to 15 percent in fiscal 2013-14, the report states.

The safety cost is expected to approach one-quarter of payroll, increasing from 22.5 percent to 23.4 percent.

"Is it a concern? Yes. It’s expensive," Olivier said. "But overall we are paying less into CalPERS."